Early Chapter 13 Plan Payoff Allowed

A recent  decision  also found that a chapter 13 debtor in a 5-year payment plan could payoff the balance of the plan early to end the bankruptcy and obtain the discharge. Miami bankruptcy Judge Mark in In re Nelson Gonzalez,  Case No. 11-16677 (November 17, 2014)(DE 155). The rule as interpreted for a Florida Chapter 13 is that an over-median income debtor must file a chapter 13 plan with a term of 5 years. (under median can be a three year period ). This is based on a technical interpretation of the statute as to “an applicable committment period”.   The 11th Circuit has previously ruled that the 5 year plan is necessary for confirmation for an over median income debtor.  However, what if after confirmation the debtor wants to modify a chapter 13 plan to pay if off early?  Judge permitted the modified plan for an early payoff and agreed with a prior decision of Judge Kimball in Palm Beach, In re Tibbs 478 BR 458, (Bankr. S. D. Fla. 2012)(which relied on a prior case from the Middle District of Florida).  On the other hand, Judge Isicoff in Miami has previously ruled that this procedure is not permissible.

I have utilized this procedure previously in Broward County chapter 13  to obtain an early chapter 13 plan payoff with success.  Any attorney wanting to proceed with the early payoff should review the Tibbs decision and cited authority.   This post is an update from a prior post discussing more the prior case law.  See:



2 Responses to Early Chapter 13 Plan Payoff Allowed

  1. Mar. 1, 2016 – Good info. Now WHERE did that early payoff $$ come from? Doesn’t Trustee require all “discretionary” income be applied to the plan? Related in a Chp.13 5 year Plan, can the Trustee require S.S. benefits $$ be turned over to Court? Think you very much for your time and courtesy in reply.

  2. Local courts and trustees may differ on approving the shortened term. You are correct that the source of the funds must be shown to the trustee. The funds would need to be from a source not subject to a requirement that they be paid into the chapter 13 plan. The funds can come from an exempt asset, such as an IRA, or a conditional gift(a gift subject to approval by the court and trustee for the early payoff). In addition, case law supports that Social Security income is not subject to any claim by the chapter 13 trustee.

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